Is the Rally on Its Last Legs?

An analyst can draw a line on a stock chart that connects price points along a market trendline...but the price action itself creates the trendline.

In other words: Trendlines reveal what the market thinks is important.

A trendline may connect along a series of price lows, which the market often reveals as support. Or, another trendline may connect along a series of price highs, which stand as resistance.

A line of support is generally where buyers participate. Sellers engage around a line of resistance.

Trendlines can stretch across various time frames: days, weeks, years, decades—even centuries.

One trendline that's exceptionally relevant to today's price action goes back at least 75 years.

On August 17, the Dow Jones Industrial Average revisited the long-term channel line that dates back 75 years to the 1937 top. Market action around this trendline has been accompanied by the most frenetic buying of the stock mania era. At both the 2000 and 2007 tops, the Dow spent months above the line before declining in the biggest drop since 1930-32. Now, the Dow has repeatedly failed, over a two-year period, to make it above this line, which our February issue termed “formidable resistance.”